The president of Japan's third-largest airline yesterday announced that his company has signed an agreement with American Airlines to help each develop Pacific routes.
The agreement was disclosed yesterday at a news conference at which the Japanese company, Toa Domestic Airlines, announced it will buy seven McDonnell Douglas twin-engine jetliners and take options on four more in a deal totaling $300 million.
Toshihiko Kubota, Toa's president, also said that a proposed McDonnell Douglas wide-cabin, tri-engine jet is a prime candidate for the intercontinental service the airline hopes to open as soon as it gets permission from the Japanese government.
Currently, five U.S. carriers and Japan Air Lines, the country's sole international operator, are allowed to fly Pacific routes and land in each country. But opportunities for routes in the highly competitive Pacific Rim have expanded for other carriers because of a recent civil aviation agreement signed between the United States and Japan.
As of April 1986, up to three new carriers from each country will be allowed to phase in service between the two countries, following an interim agreement signed last May, according to a U.S. Department of Transportation official. Meanwhile, Japan and the United States remain involved in renegotiating their complex civil aviation agreement signed in 1952, a long-standing point of tension between Washington and Tokyo.
The prospect of making a dent in the potentially lucrative Pacific market appears at the heart of the memorandum of understanding signed Aug. 8 between Kubota and Robert L. Crandall, American Airlines' chairman. American spokesman Lowell Duncan said the carrier has applied to the Department of Transportation to begin service between Dallas/Fort Worth and Tokyo.
"If we are able to get a route, we need some kind of a knowledge of how to deal in the airline business" in Japan, Duncan said, explaining the purpose behind the agreement. "It's an agreement to sit down and talk about ways we can mutually benefit each other."
Duncan said it is too early to specify the nature of the cooperation between the two airlines, although Kubota said possibilities included giving each other access to passenger lists and helping develop feeder services.
Eventually, Toa hopes to be able to serve the Fort Worth/Tokyo route as well as other international cities, but Kubota declined to specify which markets.
The Toa-American agreement comes only months after Pan American World Airways announced it had agreed to sell, subject to government approval, its Pacific routes to United Airlines, American's chief domestic competitor. The proposed sale price is $750 million.
Wolfgang Demisch, who follows the airline industry for First Boston Corp., said the deal is "a convenient way for American to latch onto the Pacific traffic without making a major investment like United."
Toa Domestic Airlines, the 25th-largest in the world, would benefit similarly in any effort it makes to break Japan Air Lines' hold on international operations from its country.
"TDA is totally domestic and used to be local, and they have no experience in international operations," said Tadao Fujimatsu, a JAL spokesman in New York. "I think they are thinking that international experience [through the arrangement with American] is necessary before they start their own operations."
Fujimatsu added, "We really think the Trans-Pacific route is already very competitive. We do not want to intensify the competition." He said, however, that Toa's entry into the international market is up to the Japanese government, which must allocate the extra routes approved under the recent bilateral agreement.
Although Toa hopes to expand its operations abroad, the planes it purchased yesterday are for use in the carrier's domestic service. The carrier bought three MD81 aircraft and four smaller MD87 models. Toa already has been flying 10 of the 163-seat MD81s, with two more previously ordered airplanes scheduled for delivery in 1986. When the 11 aircraft announced yesterday finally are delivered, sometime after 1987, Toa Airlines will have acquired 45 aircraft from McDonnell Douglas, a St. Louis-based company.
The sale comes at a time of friction between the United States and Japan over the trade imbalance between the two countries, which may reach $50 billion this year. In Tokyo earlier this week, U.S. Trade Representative Clayton Yeutter urged Japanese officials to increase imports of U.S. aircraft and auto parts to reduce this imbalance.
Toa's Kubota said, however, that the purchase had nothing to do with the trade deficit. "The primary reason for the purchase is that I personally believe the aircraft manufactured by McDonnell Douglas is of fine quality." He added that his company is buying the McDonnell airplanes despite lobbying by West European and Japanese government officials who favored the purchase of the European-manufactured Airbus.
"The prime minister of Japan can insist or solicit about the purchase of European airplanes, but I am the one who makes the decision," he said.